Its implementation should be sped up to stimulate economic activities to bridge the output gap and create jobs, the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) has said.

The MPC offered to work with the fiscal authorities to quickly mitigate the economic pains in the country, particularly the discomfort of inflation.

The CBN raised interest rate from 12 to 14 per cent to encourage savings and investment.

Addressing reporters at the end of the bi-monthly MPC meeting in Abuja, the CBN Governor Godwin Emefiele, said: “the MPC underscored the imperative of coordinated action, anchored by fiscal policy, to initiate recovery at the earliest time.”

The MPC, Emefiele said, advocated “for the urgent diversification of the economy away from oil to manufacturing, agriculture and services and called on all stakeholders to increase investment in growth stimulating and high employment elasticity sectors of the economy in order to lift the economy out of its current phase.”

The MPC, he said, recognised the weak macroeconomic environment, as reflected particularly in increasing inflationary pressure and contraction in real output growth. Members, Emefiele said, “call on the Federal Government to fast-track the implementation of the 2016 budget in order to stimulate economic activity to bridge the output gap and create employment.”

Members, the governor said, agreed that the economy was passing through a difficult phase, dealing with critical supply gaps and underscored the imperative of carefully navigating the policy space to engender growth and ensure price stability. The MPC summarised the two policy options it was confronted with as restarting growth or fighting inflation.

The MPC expressed concern over non-payment of salaries in some states and urged express action in that direction to help stimulate aggregate demand.

The MPC restated its commitment to measures and deployment of relevant instruments within its purview to complement fiscal policy with a view to restarting growth.

The Committee also enjoined Deposit Money Banks (DMBs) to partner with the government and the CBN “by redirecting credit from low employment generating sectors to those capable of supporting growth, reducing unemployment and improving citizens’ standards of living”.

Emefiele lamented that the economy is still saddled with the effects of the shocks of the first quarter of 2016, which led to a contraction in output arising from energy shortages, high electricity tariffs, price hikes, scarcity of foreign exchange and depressed consumer demand, among others.

The CBN governor also said “the implementation of the 2016 budget in the second quarter remained slower than expected”. “The Committee noted that most of the conditions undermining domestic output growth were outside the direct purview of monetary policy.

“Aggregate output contracted in virtually all sectors of the economy, with the non-oil sector recording a decline of about 0.18 per cent, compared with the 3.14 per cent expansion in the preceding quarter. Agriculture and Trade were the only sectors with positive growth at 0.68 per cent and 0.40 per cent, respectively, whereas, Industry, Construction and Services contracted by 0.93, 0.26 and 0.08 percentage point, respectively.”

Speaking on the biting inflation Emefiele said “the increase in headline inflation in June reflected increases in both food and core components of inflation”. Core inflation “rose sharply for the fourth time in a row to 16.22 per cent in June, from 15.05 per cent in May; 13.35 per cent in April; 12.17 per cent in March; 11.00 per cent in February and 8.80 per cent in January having stayed at 8.70 per cent for three consecutive months through December, 2015. Food inflation also rose to 15.30 per cent in June, from 14.86 per cent in May; 13.19 per cent in April; 12.74 per cent in March; 11.35 per cent in February, 10.64 per cent in January and 10.59 per cent in December, 2015.”

Emefiele noted that the MPC was concerned that while the situation called for obvious tightening of the monetary policy stance, the technical recession confronting the economy and the prospects of negative growth to year-end needed to be factored into the policy parameters.

The MPC voted to: Increase the MPR by 200 basis points from 12.00 to 14 per cent; Retain the CRR at 22.50 per cent; Retain the Liquidity Ratio at 30.00 per cent; and Retain the Asymmetric Window at +200 and -500 basis points around the MPR.

Emefiele assured the country that the CBN development finance focus remained.

He said: “We would through target interventions continue to support Disbursements of funds to certain targeted sectors of the economy, particularly agriculture, mineral sector those who want to go into new and fresh manufacturing, importation of plants so as to boost industrial output.”

“The MPR was moved up by 200 basis points for specific reasons and the CBN remains committed to boost through targeted intervention and through its anchor borrower programme not only for rice but also for tomato and other agricultural produce where we see potentials for strong comparative advantage in the country, Emefiele said.